2. Discuss the problems and opportunities connected with assessing the profitability of the different services offered by the airport to the airlines and their customers. You are, among other things, asked to consider whether you would recommend the use of Full Cost, Activity Based Costing, or Contribution Margin Concept to the company and state the reasons for your recommendation. Problems

* Costs are not sufficiently adjusted to the income, specifically; management finds it difficult to get an overview of how the various business areas utilize the airport’s resources and services.

An explanation of this is that since the costs related to the airport are almost all capacity costs, which means that the costs do not vary with the level of production and can be reduced or avoided only by shutting down the business, these costs do not increase or decrease in proportion to the increase or decline on income. In this case, assessing the profitability of the different services are quite hindered since comparing the difference between the revenues and costs would not be accurate since almost all costs are fixed which means that it is irrelevant in general.

* Prices for building-served and remote gates are currently not differentiated although building-served gates service passengers better than remote gates.The slight difference in prices for building-served and remote gates makes it ambiguous as to whether which earns more than whom. This increment does not show financially, even though it is known that building-served gates better service passengers, how large the latter has earned more than the remote gates.

* Relation between take-off duties and passenger duties – occasional imbalances in the case of small aircraft with many passengers and large aircraft with few passengers

Opportunities
* Differentiation in passenger fees for passengers who merely touch down at the airport, but never leave the aircraft as opposed to passengers who only...

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A Discussion on Activity-BasedCosting
ACC-532 Graduate Paper
A Discussion on Activity-BasedCosting
When we think of cost of accounting it is easy to come up with numerous different cost accounting methods which is because over the year’s cost accounting has developed in numerous ways to accommodate different types of situations. While every type of cost accounting is important and has its own benefit and disadvantages this paper will focus on what I believe is one of the most important cost accounting methods. The method that this research paper will focus on is the activity-basedcosting method, more commonly known as the ABC method. “A costing method that first assigns costs to activities and then to goods and services based on how much each good or service uses the activities” (Hilton, 2014), this is the definition of the ABC method according to the textbook Advanced Cost Accounting. While I believe that this definition gives us a good idea of the general idea of what the ABC method is it does not even begin to crack the surface of how important this costing method is and how essential it is to the companies that utilize it. In order to get a broad understanding of the ABC method this research paper will focus on three focus points. The first focus point...

...Introduction
The management of costs remains pertinent to the successful operation of any company. To achieve a competitive edge a company must consistently improve their service or product quality, lower their service or product costs, and eliminate services or products that incur profit losses. Using a traditional costing system the portion of overhead costs allocated to the production of a service or product is determined by the total of direct labor hours used in production of the service or product. Companies implement refined cost allocation systems such as the activitybasedcosting method with the intention of helping management strategically plan because these systems provide quality information to help management make informed decisions. In this essay, I will examine the use of cost allocations, the activitybasedcosting method, and how companies can implement and benefit from activitybasedcosting.
Cost Allocations
The allocation of costs serves four primary purposes throughout a company. The first is to present the information management needs to make an informed decision. The second is the reduction of non-essential uses of common company resources. The third is to encourage management to assess the efficiency of services provided internally. Finally, the fourth reason is the calculation of the “full...

...ActivityBasedCostingActivity-BasedCosting (ABC) was developed as a practical solution for problems
Associated with traditional cost management systems. In the early 1980’s many
Companies began to realize that their traditional accounting systems were
generating inaccurate costing information. Traditional cost accounting systems
that were designed to address the issues of inventory valuation for external
audiences have two deficiencies. The inability to accurately determine actual
total product and service costs and the inability to provide useful information to
management for purposes of making operating decisions.
Users of ABC
Businesses want to know which of their products and services make or lose
money so they can remain competitive. To get a handle on this information, some companies have embraced activity-basedcosting/management (abc/m) to help them tract product and customer profitability and reduce operating costs. armed with the facts from, the abc/m data, managers can make better decisions about how they can use resources and can improve business processes.
ABC Methodology
Activity-basedcosting is an accounting methodology that links the following
elements; costs, which are the expenditures are classified as product costs. That resources are costs that are...

...ActivityBasedCosting can be defined as an accounting methodology that assigns costs to activitiesbased on their use of resources, rather than products or services. This enables resources and other associated costs to be more accurately attributed to the products and the services which they use. It doesn’t change or eliminate any costs; it provides detailed information about how costs are consumed. (Online manager-net.com).
Traditional cost accounting looks at what is spent, while ABC methods look at what is done in terms of activities. In ABC it is much easier to identify opportunities to reduce costs and improve performance, while maintaining the quality of care provided.
Traditional Cost Systems use cost allocation methods, do not focus on where or why costs occur, Report information that is accounting oriented and inaccurate. These systems are also not easily understood by operational managers, since the focus is fiscal.
Whereas ActivityBasedCosting assigns costs to activitiesbased on the resources they consume. ABC provides insights into the sources of costs and the possible impact of different decisions. It also provides the information required to take action and realize performance breakthroughs.
Implementation of ActivityBasedCosting
In Most cases,...

... * Activity-BasedCosting (Encyclopedia of Management)
* Activity-BasedCosting (Encyclopedia of Small Business)
Activity-BasedCosting
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Activity-basedcosting (ABC) is an accounting method that allows businesses to gather data about their operating costs. Costs are assigned to specific activitiesuch as planning, engineering, or manufacturingnd then the activities are associated with different products or services. In this way, the ABC method enables a business to decide which products, services, and resources are increasing their profitability, and which are contributing to losses. Managers are then able to generate data to create a better budget and gain a greater overall understanding of the expenses that are required to keep the company running smoothly. Generally, activity-basedcosting is most effective when used over a long period of time, as opposed to shorter-term solutions such as the theory of constraints (TOC).
Activity-basedcosting first gained notoriety in the early 1980s. It emerged as a logical alternative to traditional cost management systems that tended to produce insufficient results when it came to allocating costs. Harvard Business...

...Cost Accounting
Activity-BasedCosting
Instructor Bradley Johnson
December 17, 2012
Activity-BasedCosting
In business, there are two separate costing methods that a firm can use. One of those methods is called traditional costing system and the other is activity-basedcosting. Activity-basedcosting (ABC) is a costing method that focuses on identifying activities which allocates the costs of each activity a firm uses. From our text, it identifies Activity-basedCosting as “a two-stage product costing method that assigns costs first to activities and then to the products based on each product’s use of activities” (Lanen, 2011, p. 329). A firm employing such a system provides a better understanding of the goods and services that it uses. Developing such a system in a firm comes from proper planning. When developing a firm, it is effective to follow certain steps to identify the process to attain the goals the firm has set. At times, many firms set certain examples by the managers to help understand the direction in which the firm is heading to become more effective. Activity-basedcosting is not only...

...Activitybasedcosting (ABC) is a relative new way to allocate costs to specific processes and services. This system assures that the costs are accurately distributed to the products or services that generated them. ABC illustrates costs more accurately, giving management insight to the cost associated with certain business activities. ABC extends the decision-making skills of management by expanding on traditionalcosting (job order costing/process order costing) techniques. However, since ABC's introduction in the 1980's, many corporations are not using ABC, despite gained managerial decision making capabilities. Even by the mid-1990s, ABC's use has not spread throughout the accounting industry and its use is not obvious (Selto & Jasinski, 1996). The following article will discuss the pros and cons of the ABC method.
ABC is an extension of traditional product costing techniques. These techniques are called job order costing and process order costing. A job order costing system arranges costs for each unit as it goes through a production process. A process cost system collects costs in work in progress account. The numbers of units worked are recorded for the accounting period.
These systems alone do not accurately illustrate costs incurred. Instead, these two costing techniques generally lump costs into...